New Delhi: Fitch Ratings on Tuesday said India's sovereign rating could come under pressure if there is further deterioration in fiscal outlook as a result of lower growth or fiscal easing.
It said that given the extended lockdown, India is likely to announce further fiscal easing to support growth and its assessment of India's rating in such a case would be guided by our judgement of its probable medium-term fiscal path in the post-crisis environment.
"Further deterioration in the fiscal outlook as a result of lower growth or fiscal easing could pressure the sovereign rating in light of the limited fiscal headroom India had when it entered this crisis," Fitch said in a statement.
It said the government may tighten fiscal policy again once the pandemic is under control, but India's record of meeting fiscal targets and implementing fiscal rules has been mixed in recent years, which will colour our assessment of any official commitment to tighten fiscal policy over the medium term. Fitch had in December 2019 reaffirmed India's 'BBB-' rating with a stable outlook.
The rating agency has revised down its economic growth forecast for India to 0.8% for the fiscal year ending March 2021 (FY21), reflecting the impact of the coronavirus pandemic and official efforts to contain it. This is down sharply from its forecast of 5.6% prior to the outbreak.